>SENSEX VIEW (ENAM)

Monthly view on Sensex
We have looked at Indian equities from the point of view of the Sensex only. This is because Sensex data is available for the last 30 years as compared to the CNX Nifty for which data is comparable for only 14 years.

A grand bull market has unfolded in India in the past 30 years, with intermittent bear markets
commencing after every 8 years. Indian markets have experienced significant bear
markets/consolidation after peaking out higher every 8 years; that is, after forming a high in the
years 1985, 1992, 2000 and 2008, markets have given in to significant corrections.
The Sensex has breached an important 5-year support trendline in the early part of 2008. This breach of trendline, coupled with an 8-year cyclical top, has brought in the current fall.
On the previous occasion when the Sensex breached a similar 5-6 year trendline, in 1992, the Sensex fell/consolidated for the next 3 years upto 1995.

Read full report here SENSEX VIEW (ENAM)

>SBI(HSBC)

Earning drivers rebound. State Bank of India (SBI) reported a 2Q FY09 net profit of
INR22.6bn, up 40% y-o-y and better than our estimate of a net profit of INR20.5bn.
Strong growth in both revenue drivers, i.e. net interest income (up 45% y-o-y) and noninterest
income (up 15% y-o-y), helped shore up the bottom line this quarter. It is
interesting to note that each of these revenue drivers grew at a single-digit rate in the
preceding quarters of FY08. In that context, revenue drivers are seeing some rebound, but
sustaining them would be crucial to maintaining profitability.

Signs of aggression visible, but with a cost. SBI showed aggressiveness as it continued
to grow its business well above the sector average. Loan growth of 38% y-o-y and deposit
growth of 28% at September-end defied signs of a slowdown. However, the timing of
SBI’s growth drive during the business downcycle may be less than ideal. This was
reflected in loan loss provisions, which increased markedly in 2Q following a writeback in
the preceding quarter. Because SBI’s loan loss coverage ratio stands at a mere 47% at
September-end, much lower than that of its peers BOB (at 77%) and PNB (at 75%), we
believe risks due to rapid loan growth may not be adequately covered.

Assume higher cost of equity, credit costs. We have raised our FY09-FY11 credit cost
estimates in view of the strong loan growth and deteriorating asset quality. We have also
raised our cost of equity assumption to 15.5% from the 13.5% we assumed earlier, in view
of the deteriorating macroeconomic environment. Increase in credit costs is the key risk.

Read full report here SBI(HSBC)

>BHARTI(CITI)

 EBITDA in-line, forex/deferred taxes distort headline profits — 2QFY09 EBITDA
at Rs37bn (+5%qoq/+37% yoy) was broadly in-line as non-mobile businesses
chipped in to cover slightly slower growth in mobile (5%qoq vs. 8-10% in the
past). Higher forex losses (Rs5.9bn vs. Rs1.5bn in 1Q) and deferred tax
recognitions distorted headline profits. We note PBT ex-forex adjustments were
up 42% yoy (vs. headline 13% growth). Bharti stays our top sector pick.

 Mobile margins increase despite seasonally weak quarter — The seasonal 1.5%
QoQ MoU decline was slightly higher than we thought; decline in rev/min was
sharper as well (4%qoq). Headline margins (30.2%) were lower. Adjusted for
the incremental 140bps on account of full quarter impact of higher NLD
carriage charge (2 months in 1Q) and diesel price hike (est. 25bps), EBITDA
margins would have been 31.9%.

Read full report here BHARTI(CITI)

 Other businesses steady — Fixed line had another strong quarter as a result of
scale economies and higher ARPUs. Long distance volumes have remained
strong and enterprise revenues jumped 25% qoq albeit with lower margins.
Towerco margins compression of 400bps was primarily on account of higher
energy costs, which though passed through, are included in gross rentals.

 We are maintaining estimates — Our subscriber net addition rate (2.3m/month)
for FY09 is well within Bharti’s YTD 2.6m rate and provides some cushion from
higher than forecast declines in rev/min and margin pressures. Sustained INR
weakness will mean forex impacts continue to distort headline profits though.

>BHARTI Q2 Result review(RELIGARE)

Read full report here

BHARTI Q2 Result review(RELIGARE)